The NSW Government provides clarity on its position on the future of coal exploration and mining

Articles Written by Samantha Daly (Partner)

This month the NSW Government published a ‘Strategic Statement on Coal Exploration and Mining in NSW’ (Statement) which provides much needed clarity for the coal industry and the community in relation to the policy position of the Government regarding the future of coal exploration and mining projects in NSW.

The Statement is a welcome addition to the NSW policy framework after what has been a bumpy road for the NSW coal industry over the last 18 months, following events such as the Rocky Hill’ decision of Preston CJ in the Land and Environment Court, the inclusion of the first ‘export management plan’ condition in a State Significant Development consent for the United Wambo mining project and the refusal of Kepco’s Bylong coal project (which is currently the subject of an appeal in the Land and Environment Court).

The objective of the Statement is to ‘provide greater certainty to explorers, investors, industry stakeholders and communities about the future of coal mining in the state’ and set out ‘how the NSW Government is taking a responsible approach to the global transition to a low carbon future.’ The Statement provides a balanced consideration of the ongoing global demand for coal, and therefore the need for ongoing support of the NSW coal industry to meet this demand, with the need to support the transitioning of certain ‘coal-dependant’ regional communities over the longer term as global economies move towards alternative energy sources.

Some of the most significant aspects of the Statement include the following acknowledgments and commitments by the NSW Government:

  • Coal is an important industry for NSW and will continue to be so for the next few decades. The industry is the state’s largest export commodity (with royalties of around $2 billion in 2018/19) and makes up 80% of our state’s electricity.
  • Whilst the industry will be affected over the longer term by a global transition to alternative forms of energy generation, this change will ‘not happen overnight’ and during the transition the NSW Government will continue to support the responsible development of coal resources for the benefit of the state.
  • Countries’ commitments under the Paris Agreement will ultimately result in the global phasing out of coal in electricity generation but will take many decades to complete. In the meantime, the demand for coal remains strong and coal remains a critical energy source globally.
  • Whilst the use of thermal coal in NSW will decline over the coming decades, ‘in the short to medium term coal mining for export will continue to have an important role to play in NSW.’ In the medium term global demand for coal is likely to remain stable.
  • Importantly, ‘ending or reducing NSW thermal cost exports while there is still strong long-term global demand would likely have little or no impact on global carbon emissions. Most coal consumers would be likely to source their coal from elsewhere, and much of this coal would be lower quality compared to NSW coal.’ This statement is significant in responding to a common issue that arises in the assessment of the greenhouse gas emissions (GHGE) and associated impacts on climate change resulting from new or expanded coal mining projects in relation to the ‘market substitution’ and ‘carbon leakage’ arguments, that is: if the coal doesn’t come from this project in NSW, it will be sourced from somewhere else and the alternative coal will likely be lower quality coal from less developed countries and therefore ultimately increase GHGE;
  • It is important that regional communities are supported in the long term to adapt to the change in energy mix and diversify their economies to develop new sources of employment. Part of this will involve supporting the growth of mining for metals in accordance with the NSW Minerals Strategy, as well as the opportunity for development of Renewable Energy Zones.

To achieve the above objectives the Statement includes a ‘plan of action’ in four areas:

  1. Improving certainty about where coal mining should not occur – to address this the NSW Government has released a map showing areas where further coal exploration or mining will be prohibited 
  2. Supporting responsible coal production in areas deemed suitable for mining – this includes proposed amendments to the Environmental Planning and Assessment Act 1979 (NSW) to prohibit approval conditions relating to exports (which we note are yet to be passed by the NSW parliament), as well as implementation of the review of the Independent Planning Commission (IPC) conducted in late 2019. In addition, the NSW Government will consider applications to extend the life of current coal mines and streamlining the process for exploring new areas and areas adjacent to current mining operations. New areas for exploration will be limited (see Figure 1) and will be released through a transparent competitive tender process, the details of which are yet to be released
  3. Addressing community concerns about the impacts of coal mining – including strengthening regulatory requirements for mine rehabilitation and closure and reduce the GHGE directly associated with coal mining (i.e. scope 1 emissions)
  4. Supporting diversification of coal-reliant regional economies to assist with the phase-out of thermal coal mining.

Notwithstanding the predictions for ongoing global demand for coal in the short to medium term, the Statement acknowledges that in the long term there is uncertainty about global demand for thermal coal and that the NSW Government will continue to monitor global coal demand and domestic production and emissions to ensure it takes a flexible and adaptive approach.

Whilst the Statement is relatively high level, it provides a degree of certainty and assurance for the coal industry as well as regional communities in NSW about the future of coal exploration and mining. Many recent determinations of development applications for coal mining projects by consent authorities have highlighted the level of uncertainty and policy ‘gap’ that existed in relation to the NSW Government’s position on the future of coal, including the ongoing demand for coal and issues such as market substitution and carbon leakage. Following the recent review of the IPC and the subsequent release of the Statement of Expectations by the Department of Planning, Industry and the Environment (DPIE) and Memorandum of Understanding between the IPC and DPIE, it is clear that the IPC must apply any applicable government policies, which will now include the Statement.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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